May was another very good month for local residential home sales with a total of 410 closed sales representing a 9.6% increase over last year. There were also an additional thirty three sales added to the first four months so the year to date increase is now at 21.2%. The average selling price increased 9.6% for the month to $266,862 and is now up 6.1% for the year.
The biggest concern in our market remains the lack of inventory. In May of last year there were 1,406 homes for sale, of which 408 were under contract, leaving a net supply of 998. At the end of May this year, there were 1,325 homes listed for sale but 611 are under contract leaving a net supply of 714 homes. So at a time of significantly higher demand, there is almost a 30% drop in supply. At least the supply has improved over the last few months rising from a net of 604 at the end of March and 634 at the end of April.
The time it takes to market a home is still dropping. For resale homes closed in May the average time to an offer was just 49 days with a total of 83 days to closing. This compares with 74 days and 108 days in May of 2012.
One of the areas we are looking to provide more of the needed supply is new home construction which continues to grow. In the first five months of this year there have been 224 closed sales compared to 146 last year. This is now 15% of sales which is a long way from the 25 to 30% contribution from new construction during the peak market period around 2005 but we expect it will continue to improve.
In addition to the low inventory, another challenge on the horizon is increasing mortgage interest rates. The Mortgage Bankers Association reported that the rates moved above the 4% mark for the first time in more than a year. We don’t expect mortgage rates to move dramatically and the forecast is for rates between 4% and 5% for the next year. This means that housing still very affordable and in most cases less expensive than renting.
The recent CoreLogic report on national home selling prices said that the selling price in April 2013 was up 12.1% compared to last year. This is the 14th consecutive monthly increase and the highest increase since February 2006. This is the 14th consecutive monthly increase in home prices. They report the metro Denver area was up 11.8% and Colorado up 10.8% so the Fort Collins area is lagging behind, which seems very typical of our market. When national prices rise or fall by double digits, we seem to go our own way with a more modest movement. For better or for worse, this helps to stabilize the market and we have been able to avoid a lot of the calamity that comes with 50% price drops.